Tanzania: Beer excise structure hurting smaller players in Tanzania
As beer consumers warm up to merriment of this year’s festive season, many may not be aware of the sad reality that most of their preferred brands may not last on shelves long enough, The Citizen Tanzania reported on December 1.
Early in November, the Managing Director of Serengeti Breweries Limited (SBL) Obinna Anyalebechi, warned of an unprecedented looming disruption on Tanzania’s beer industry that may lead to closure of business by smaller payers.
Obinna was referring to recent changes to Tanzania's beer excise tax structure that have raised concerns among smaller brewers, who argue that the current system disproportionately benefits larger producers and stifles competition within the industry.
The introduction of a Sh620 per litre excise tax concession in the 2021/2022 fiscal year for beer made from local malt, has created a significant divide between the giants and the smaller players. Larger brewers equipped with the resources to build and operate malting plants, have capitalized on this concession.
In contrast, smaller brewers, limited by their production capacity, face substantial barriers. The cost of establishing a malting facility is estimated to range from Sh40 to 50 million, an investment, according to Obinna is simply out of reach for many smaller players.
There is no alternative source of local malt in Tanzania, a fact that hitherto compelled malt users to import and therefore uniformly pay a higher excise tax of Sh918 per on beer made from imported malt.
Consequently, smaller players are now finding themselves paying a higher excise tax of Sh918 per litre on beer made from imported malt, which is 32 percent more than the rate for beer produced with local malt.
It is based on what the MD informed the Budget Committee beer excise terrain in the country had established what he termed as “an unfair playing ground for beer producers.”
To reverse the situation and create a win-win environment for players the MD joined other smaller brewers in advocating for a more equitable tax structure, proposing the introduction of an intermediate excise tax band of Sh680 per litre for beer made with at least 75 percent local content.
Together smaller brewers argue that this adjustment would incentivize all brewers equally while reducing their reliance on imported malts.
The new tax band, which is non-discriminatory, will also promote the use of locally sourced cereals such as maize, sorghum, and cassava, which are abundant in the region.
“It will benefit more farmers growers of different local crops compared to the Sh620 tax band which only benefits a select small group of barley producers,” he said.
Obinna further noted that the proposed change will significantly enhance local agricultural production and create a more balanced economic landscape while the shift towards locally sourced ingredients would lead to substantial foreign exchange savings.
By decreasing the importation of malt, the funds would instead flow into the hands of Tanzanian farmers, fostering rural development and bolstering the domestic economy.
Responding to the small brewers’ concerns, both the Deputy Minister of Industry and Trade Exaud Kigahe as well as the Parliamentary Budget Committee Chairman Deo Mwanyika acknowledged that the brewers’ have a valid concern promising to interrogate their submission further.
“In the spirit of our continued quest to promote local industrialization, we take the concerns raised by SBL for further consideration which forms the rational for the joint visit by the ministry and Budget committee to their brewery today,” Kigahe assured the brewer.
Mwanyika on the other hand echoed the minister’s remarks on validating the brewer’s proposals saying “we will review this proposition taking into consideration the broader national, social and economic interests of our nation.
In June 2023 Tanzania Breweries Limited (TBL), the country’s biggest beer producer commanding over 60 percent of the beer market, announced at a press event plans to build a USD 40 million malting plant in Moshi which has become operational from this year.
Then TBL Managing Director Jose Moran was quoted by the media as saying that: The total expenditure in the revamping of the Kilimanjaro Malting Plant is expected to be Sh96 billion, with Sh42 billion injected in the first phase. Overall, through this investment, the plant will broaden the contribution of manufacturing and local agriculture to the economy of Tanzana.”
02 December, 2024
